Exam 20: Income Taxation of Trusts and Estates

The Yeoman Trust has generated several Federal income tax credits for this tax year. Which taxpayer(s), if any, can use these credits in computing a Federal income tax liability, e.g., the grantor, the trust, its income beneficiaries, its remainder beneficiaries? Answer for estates, simple trusts, and complex trusts.

A single trust that is operated independently for each of its three beneficiaries might be taxed using the ____________________ rule.

A fiduciary's distribution deduction shifts the tax burden for the distributed amount of current­year income from the entity to the beneficiary.

For each of the following independent statements, choose the best answer. e. Tax attribute of complex trusts only f. Tax attribute of estates only g. Tax attribute of estates and complex trusts h. Tax attribute of neither estates nor complex trusts -The entity can be operated under the separate share rule.

For each of the following independent statements, choose the best answer. e. Tax attribute of complex trusts only f. Tax attribute of estates only g. Tax attribute of estates and complex trusts h. Tax attribute of neither estates nor complex trusts -A decedent created the entity.

A complex trust automatically is exempt from the Federal AMT.

The Chen Trust is required to distribute its accounting income every year, one-half to Missy Chen, and one-half to the local church's homeless shelter. What is the Chen Trust's personal exemption?

Reyes contributed assets to a trust, designating daughter Maria as the income beneficiary, and grandson Julio as the remainder beneficiary. This year, fiduciary accounting income was $50,000. The trustee paid $5,000 of this amount as premiums for a life insurance policy on Anita, Reyes' wife. Reyes pays Federal income tax on $5,000 for the year.

One­fourth of the Cruger Estate's distributable net income consists of net long­term capital gains. Thus, when income beneficiary Susie receives a $40,000 income distribution from the estate, $10,000 of it qualifies for the 15%/20% tax rate.

Reggie is one of the income beneficiaries of the LaQuanda Estate, which is subject to a 35% marginal Federal estate tax rate, a 35% marginal Federal income tax rate, and a 10% marginal state income tax rate. This year, Reggie received all of the sales commissions that were earned and payable to Lulu LaQuanda (cash basis) at her death. Compute Reggie's § 691(c) deduction for the current year, given the following data. Sales commissions receivable $50,000 Deferred gain on installment sale, three payments to be received, starting next year 20,000

Beneficiary information concerning a trust's income and distributions are conveyed on Schedule ____________________ of the Form 1041.

Tax planning usually dictates that high-income and high-wealth individuals be specified as second-tier beneficiaries of a trust arrangement.

This year, the Huang Trust is a complex trust. This year, it distributed all of its accounting income and $5,000 from corpus, to its sole income beneficiary Kun. Huang's taxable income for the year is:

Tax planning motivations usually predominate over other objectives in deciding whether to create a trust.

Entity accounting income is controlled by the terms of the for an estate or the ____________________ for a trust.

The Rodriguez Trust generated $300,000 in alternative minimum taxable income (AMTI) this year. The trust is subject to a marginal Federal income tax rate of:

The first step in computing an estate's taxable income is the determination of its fiduciary accounting income for the year.

Does the estate or trust's distributable net income always equal its deduction for distributions to beneficiaries? Are the two amounts ever equal in amount? Answer for estates, simple trusts, and complex trusts.

The Testa Trust was terminated this year and Chip, the beneficiary of the corpus, received all of the trust assets. The trust reported a $10,000 net operating loss for the current tax year; this was the only tax year in which the trust operated a business. Testa has one income beneficiary, Flo. As a result of these transactions:

In computing the Federal taxable income of a trust, a modified approach is used.